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If you don’t have enough funds for a cash purchase of real estate with your IRA, you can partner with others.
Okay, so you’re ready to take advantage of all the benefits of real estate in a self-directed IRA—the tax-free profits, the asset protection, and the potential for high returns and creating lasting wealth. You even have a couple of investment properties that you’re ready to purchase.
The only problem…? You don’t have enough money in your IRA to purchase the property outright, and you don’t want to get a non-recourse loan.
Fortunately, you have options—including having your self directed IRA partner with other investors to purchase the property. This is often called “purchasing an undivided interest” in the property.
How to Partner to Purchase Property with Your Self-Directed IRA
Here’s how to purchase property with a self-directed IRA by partnering with other investors:
- Seek out potential partners in friends, family members, co-workers, or business associates.
- Once you’ve identified a partner for the deal, combine your self-directed IRA funds with the other investor’s funds to purchase the property.
- Your self-directed IRA then owns a percentage of the property proportionate to the percentage of funds you contributed.
- Your self-directed IRA is responsible for a portion of all property expenses equal to the percentage of ownership, and the same portion of all income related to the property goes into your self-directed IRA.
- Once the property is sold, your self-directed IRA receives a portion of the proceeds matching the proportion of your original investment.